May 16, 2018

Reassurance From New Council Of Eminent Persons

The Council of Eminent Persons held a briefing for investors, shedding some light on certain broad-based measures. However, details of fiscal reforms will only be announced in the first 100 days, aimed at raising disposable income. Architects of the PH manifesto reiterate that the government must deliver: a) institutional reforms – including reducing/eliminating corruption, b) strong check and balance, and c) economic reforms – ensuring that money is in the hands of Malaysian households.

WHAT’S NEW• Council of Eminent Persons instilling confidence. The newly-formed Council of Eminent Persons (Council) held a briefing for investors yesterday with Tun Daim Xainuddin and Tan Sri Zeti Aziz as speakers. Raising disposable income is a key focus. The Council has been actively meeting various representatives from the investment community (eg GLC funds) and regulators (eg MoF, Securities Commission, Chamber of Commerce) and reassured that Malaysia’s fundamentals and financial system remain strong, and that any near-term weakness in the fiscal position due to the abolishment of GST will be short-term in nature as swift execution of its economic and institutional reforms should lead to stronger market confidence and consequently improved fiscal position and ringgit strength.

• Key highlights of the briefing. a) Measures of the comprehensive fiscal reform to be released within the first 100 days will be orderly in nature. b) Comprehensive review of the tax regime with emphasis on GST. c) Emphasis on reducing public wastage (eg government’s procurement cost) and curbing of corrupt practices as well as scrapping certain mega projects will help to partly plug the revenue gap from the abolishment of GST. d) A task force to be set up to recover 1MDB monies and a separate group comprising the MACC, Attorney General and police to investigate scandals and charge relevant people involved in the 1MDB scandal. e) The government’s role will gradually decline and the private sector playing a more prominent role, hence reducing the “crowding out effect” on private investments. f) More transparent open bidding and assessment of mega infrastructure projects. g) Made recommendation to the government that no politicians be involved in GLCs. h) The government will also honour its debt obligations with regard to toll concessionaires.

• Setting up a committee on institutional reforms. The Council has also announced the formation of a committee on institutional reforms, crucial in ensuring a strong follow through and execution of the positive economic reforms

ESSENTIAL• The Pakatan Harapan manifesto… We had recently attended a forum titled “Keeping The Promise of Reform” organised by the Jeffrey Cheah Institute on Southeast Asia. Key panelists Wan Saiful and Liew Chin Tong were some of the many architects behind the Pakatan Harapan manifesto. • ...focuses on the well being of the rakyat and a strong check and balance system. Key takeaways are: a) strong emphasis on the need for institutional reform, and b) economic reforms. The key message on economic reforms is that ordinary Malaysians must benefit from economic growth and it is the role of the government to make sure that the money is in the hands of the households (focusing on productivity and multiplier effect of the economy). It is also the job of the current government to reduce/ eliminate corruption and create a strong check and balance system (including limiting the Prime Minister’s term of office and ensure a strong and viable opposition party by providing funding for them).